💻 Buy a SaaS Business Calculator

📋 SaaS Deal Parameters

📚 Buying a SaaS Business: What Separates Good Deals from Bad

SaaS acquisitions are fundamentally different from brick-and-mortar business acquisitions. The asset you are buying is code, customers, and contracts. There is no equipment to inspect, no lease to review, and no inventory to count. Instead, the critical due diligence is about churn, technical debt, customer concentration, and platform risk.

ARR Multiple vs SDE Multiple: Which Matters More?

For SaaS businesses, buyers often use ARR multiples (3–6x ARR for small SaaS) rather than SDE multiples because ARR is more predictable than SDE. However, ARR multiples only make sense if gross margins are healthy (70%+). A SaaS business with 40% gross margins (heavy infrastructure costs) is not comparable to one with 85% gross margins (pure software). Always compare deals on SDE multiple too — it normalizes for cost structure differences.

Churn: The Silent Killer of SaaS Acquisitions

Monthly churn of 2% sounds small, but it means losing 21.5% of your ARR annually. For a $150,000 ARR business, that is $32,250 in lost revenue per year that must be replaced by new customer acquisition just to stay flat. When modeling a SaaS acquisition, stress test with realistic churn — what is the revenue trajectory if churn continues and you cannot replace it with growth? If the answer is "revenue halves in 3 years," that changes your valuation ceiling dramatically.

NRR: The Most Important Single Number

Net Revenue Retention above 100% means the business is growing from within — existing customers expand their usage faster than others churn. NRR of 120% means even without a single new customer, revenue grows 20% annually. This is a compounding machine. NRR below 90% means the business is in slow decline and requires continuous new customer acquisition just to stay flat. Target NRR > 100% for any SaaS acquisition.

Technical Risk Assessment

Before acquiring a SaaS business, hire a technical consultant (or use a service like UpStone or DealRoom) to review the codebase. Key questions: (1) What is the tech stack and when was it last updated? (2) Is there automated test coverage? (3) Are there known security vulnerabilities? (4) What is the hosting cost and is it optimized? (5) Is the code well-documented? A technically sound SaaS with clean code is worth more than one with spaghetti code requiring a $50,000 refactor.

Where to Find SaaS Businesses for Sale

Acquire.com (formerly MicroAcquire) is the largest marketplace for SaaS acquisitions under $5M. Flippa lists both SaaS and content businesses. Empire Flippers is known for quality vetting of profitable online businesses. For larger SaaS ($5M+), work with technology-focused M&A advisors like Software Equity Group or Arma Partners.

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